Household Spending Falls to Its Lowest Point
Index of Consumer Spending
The Index of Consumer Spending averaged 88.9 points in May, its lowest point since its inception (the week of April 10, 2022 = 100).
- Despite the small spending increase in April, May’s Index of Consumer Spending resumed the downward trend that began following January. This decline is reflected weekly, with the first week of May dropping 3.7 points from the final week of April. The week of May 7 wasn’t better, with the index dropping another 1.6 points to 88.5. The decline stalled the week of May 14 with a slight bump to 88.9, and finally, the index dropped to 87.9 the week of May 21, its lowest weekly point to date.
- Apart from British Columbia and the territories, all regions of Canada experienced declines in spending. At the head of this decline was the Atlantic region, which had a monthly average decline of 6.2 points. Following that was Ontario (–3.8 points), Quebec (–3.4 points), Alberta (– 1.1 points), and Manitoba–Saskatchewan (–0.2 points). While British Columba and the territories did not decline, their increases were small, with British Columbia only up 1.0 points and the territories only up 2.9 points.
- Although spending was down, consumer confidence rose 0.6 points in May, according to our Index of Consumer Confidence. This rise in confidence was associated with small increases in outlooks that future finances would be better and a drop in those who believed their current finances were worse than before. Tempering this was a decline in future job prospects. The majority opinion across current and future finances and future job prospects was that situations would remain the same. Despite some positive movement, the fact that outlooks are largely favouring stagnation and are paired with decreases in spending may indicate that households are generally settling into their austere economic situations and adjusting their spending accordingly.
- Short-term spending may not see much recovery. May came with a 0.1 per cent drop in employment. If this continues in the coming months we will likely see further drops in spending. Further, household debt costs are set for another rise following the Bank of Canada’s 25-basis-point rate increase in June. As the increase’s effects trickle throughout the economy, additional belt-tightening is likely to occur.
Alberta
The index averaged 94.9 points in May, down from 96.0.
Alberta was the only province or region this month that strictly saw drops. May’s first week had Alberta’s index declining from 99.5 points the week before to 96.6—a 2.9-point drop. The following weeks of May continued this path, with drops of 0.6, 1.5, and 1.8 points in the final three weeks—a cumulative 6.8-point drop across the month. Alberta’s wildfires are likely linked to this, as consumers may have held off on spending in preparation for any further disruptions or damages due to the fires.
Atlantic provinces
The index averaged 96.3 points in May, down from 102.5.
Reversing April’s increase, the Atlantic region experienced a significant decline in May. The largest week-to-week change happened in the first week as the index dropped from 103.8 to 97.4 points. Following the initial dive, the remaining weeks continued the downward trend, albeit more gradually. The week of May 7 shaved off another 1.4 points, bringing the index to 96.0, and the week of May 14 had a slight uptick, increasing by 0.4 points to 96.4. And the final week of May 21 cut another 0.8 points to settle the index’s weekly value at 95.2. From April to May, employment in the region had some small declines. Nova Scotia—the largest of the regions—experienced drops of 1.2 per cent in its participation rate and 0.8 per cent in its employment rate. Similar movement was also seen in the region’s other provinces except for New Brunswick, which had no changes.
British Columbia
The index grew to 90.5 points in May, a 1.0-point increase from April.
Only one of two regions to increase from last month’s average, British Columbia’s index grew 1.0 points. The first week of May saw a small decline from April’s final week, dropping from 91.3 to 90.0. Despite this, the index remained within the 90s the following weeks, moving from 90.0 to 90.4 the week of May 7, to 91.5 points the week of May 14, and back to 90.2 the week of May 21. The increase in spending could be due to the 2,100 jobs added in April, which likely provided British Columbian consumers with access to more disposable income that trickled into May.
Ontario
The index averaged 82.6 points in May, its lowest point to date.
Like other regions, Ontario’s Index of Consumer Spending experienced a downward trend. The first week of May started Ontario’s index with a sharp drop-off from the last week of April, falling 4.3 points to 84.7. The following weeks did little to recover, with the week of May 7 bringing Ontario’s index to its lowest point ever, 81.7, the week of May 14 bringing the index to 81.9, and the week of May 21 bringing the index to 82.2 to end the month. Despite this, consumer confidence increased in May, with Ontarian’s growing optimism in their future finances contributing largely to this. This optimism could hint toward future gains in people’s disposable income, which might help Ontario climb back from its low in May over the coming months.
Quebec
Down 3.4 points, May’s index averaged 87.3 points.
Quebec’s index yo-yoed this month. Starting the month, the index dropped from 94.4 points in the last week of April to 88.5. The week of May 7 continued this, dropping the index down to 86.9, only to bump back to 88.2 the week of May 14. Ending the month, the week of May 21 swung the index back down to rest at 85.4. In line with this drop in spending, Quebec experienced a significant drop in consumer confidence in May. Contributing to this was a loss in positivity around future job prospects and major purchases. A possible explanation for this decline could be that Quebecers are financially preparing for the province’s wildfire season, which began unusually intense in May.
Manitoba–Saskatchewan
The index averaged 107.1 points in May.
Faring much better than other regions, Manitoba–Saskatchewan only dropped 0.3 points this month. Unlike most regions, Manitoba–Saskatchewan saw an increase going in the first week of May, rising to 107.2 points. However, like Quebec, Manitoba–Saskatchewan’s index yo-yoed the following weeks, with the index sliding to 106.4 the week of May 7, bumping back up to 108.1 the week of May 14, and settling back down at 106.8 points the week of May 21. Each province’s April-to-May employment changes almost counter each other. While Manitoba saw no change to its unemployment rate, it experienced growth in its employment and participation rates. Saskatchewan, meanwhile, experienced drops in all three. Consumer confidence may partially explain why there was little change. The region’s outlooks on current and future finances moderated in May, with notable increases in the proportion of consumers who believed these would stay the same.
Territories
The index averaged 104.2 points in May.
The territories had the largest monthly increase in its average index value, adding 2.9 points to April’s 101.3. The first week of May began slightly lower than the last week of April, down 0.6 points from 103.9 to 103.3, before jumping 4.5 points in the week of May 7 to 107.8. The week of May 14 remained high at 107.0 before dropping to 98.9 points the week of May 21. Despite the drop in the final week, the territories’ index remained the second-highest region, only behind Manitoba–Saskatchewan.
Apart from British Columbia and the territories, all regions of Canada experienced declines in spending.
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Canada’s Gross Domestic Product is largely made up of consumption. One way to gauge how the economy is performing is to look at how much Canadians are spending. Yet across the Canadian economic landscape, there is a lack of readily available consumer spending data. With that in mind, we created the Index of Consumer Spending for provinces and for Canada as a whole. This unique Index is powered by exclusive consumer transaction data provided by Moneris Data Services. Moneris is Canada’s number one payment processor with over 3.5 billion transactions spanning more than 325,000 merchant locations. This index is intended to inform senior policy makers how the country and the provinces are doing. Updates on this index will be released monthly.
Disclaimer: Forecasts and research often involve numerous assumptions and data sources and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.